Oil price falls again on supply glut fears

24th March 2016, Comments 0 comments

World oil prices sank Thursday, extending the previous day's losses as soaring US crude stocks compounded concerns of a lasting world supply glut.

At about 1250 GMT, US benchmark West Texas Intermediate (WTI) for delivery in May dipped 95 cents to $38.84 a barrel.

Brent North Sea crude for May delivery lost 97 cents to $39.50 per barrel compared with Tuesday's close.

The oil market had already tumbled on Wednesday after the US Department of Energy (DoE) said commercial reserves surged 9.36 million barrels last week to 532.5 million barrels, much higher than market expectations.

"That huge build in crude inventories really suggests that ... the overall supply situation remains imbalanced," said Sydney-based CMC Markets strategist Michael McCarthy.

"These are big numbers and the market can't just shrug that sort of thing off."

Oil has been under pressure because demand in major consumers like China has failed to keep up with production, leaving a huge excess of world supplies.

A strengthening US dollar put further pressure on prices, after a Federal Reserve official said Wednesday the US could raise interest rates as early as next month.

A stronger greenback tends to hurt demand for dollar-priced commodities, as it makes oil more expensive for buyers using weaker currencies.

"We've been expecting US dollar strength to resume and it certainly has," McCarthy told AFP.

WTI rose last week above $40 for the first time since December, boosted by a sharp drop in the dollar.

Renewed optimism that producers, including members of the OPEC group, would strike a deal to freeze output at a meeting in Doha on April 17 had also buoyed prices.

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© 2016 AFP

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